When the Fed Undertakes Reverse Repo Transactions with Financial Institutions

question 340

Multiple Choice

When the Fed undertakes reverse repo transactions with financial institutions, it is trying to

• A)increase the money supply.
• B)reduce the money supply.
• C)increase the federal budget deficit.
• D)reduce the federal budget deficit.

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Definitions:

Treasury Bill

A short-term government debt instrument issued at a discount from the face value and pays no interest before maturity.

Simple Interest

The calculation of interest that is based only on the original principal amount and does not include interest on interest.

Market Values

Refers to the current price at which an asset, security, or commodity can be bought or sold in the marketplace.

Promissory Note

A Promissory Note is a financial instrument that contains a written promise by one party to pay another party a definite sum of money, either on demand or at a specified future date.